Innovation being held back by banking bonuses

Change of culture needed as innovation not incentivised in banks, according to a market expert.

Innovation within investment banks is being stifled by the incentives of annual performance bonuses, according to a market expert from EY.

As banks are looking to implement new technologies, they are teaming up with FinTech firms while also exploring independently through innovation labs.

However, with these developments often taking years to come to fruition, some employees may not be keen to devote time to innovation, in place of producing tangible results told David Williams, partner, banking and capital markets advisory at EY, to an audience at Sibos in Geneva.

“It’s taking far too long for ideas to go into an innovation lab and out the other end into a product,” he said.

“It’s hard to get innovation done with one-year performance bonuses.”

Williams explained that a change is needed for innovation to move quicker through investment banks but the “culture is not there yet”. 

“It’s not a risk-free bet, some things will work and some things will not,” Williams said.

EY released a report on FinTech collaborations with investment banks and investigated where new technologies will be best placed.

Reconciliation was one area pinpointed by Williams, who believes its time to shift away from people manually moving data from A to B.

“Some investment banks have 3,000 people doing reconciliation, and there was no reason that can’t be replaced with automated processes.”